Chinese state firms launch $774m science & tech fund in Shanghai

Four months after the launch of China’s STAR Market aimed at improving the country’s market liquidity and tech self-sufficiency, a group of state-backed companies have jointly set up a fund of funds (FoF) with 5.5 billion yuan ($774.40 million) in initial capital to back tech investments.

The new fund, dubbed Pudong Science and Technology Innovation Fund, was launched by Shanghai State-Owned Assets Supervision and Administration Commission, the local assets watchdog; China Construction Bank (CCB), the country’s second-largest lender; and Bank of Shanghai in eastern China’s financial hub where the country’s new Nasdaq-style tech board STAR Market is located.

The fund aims to create a pool of industry sub-funds worth a total of 20 billion yuan ($2.81 billion) for investments in six major areas, namely integrated circuits, smart manufacturing, aviation and aerospace, innovation in medicine, autonomous vehicles, and big data.

Four state-owned high-tech park developers and operators in Shanghai, including Shanghai Zhangjiang Group, will lead the fundraising process for the sub-funds and raise capital from the private sector. These funds are expected to start investing this year.

The local authorities and state-backed companies in Shanghai are seeking to drive the development of startups as part of a broader push by Beijing to encourage investments in domestic tech innovators.

The STAR Market, one of the most prominent moves undertaken by the government, has witnessed 64 listings as of September 2019, according to information disclosed by the Shanghai stock exchange.

“The launch of the FoF and sub-funds in Shanghai will further enhance capital’s role in promoting the development of real economy, helping to realize the deep integration between finance and technology,” said Bai Tinghui, director of Shanghai State-Owned Assets Supervision and Administration Commission.

“Companies with government background will shift their focus from ‘hard sectors’ like regional development and infrastructure construction to ‘soft sectors’ including fund investment and industry development,” said Bai.